New York, March 15, 2013 -- Moody's Investors Service has downgraded the rating of 11 tranches,
upgraded the rating of 1 tranches, confirmed the rating of one tranche,
and affirmed the rating of 29 tranches from 6 transactions, backed
by Subprime mortgage loans.
Complete rating actions are as follows:
Issuer: Aegis Asset Backed Securities Trust 2005-1
Cl. M1, Downgraded to A3 (sf); previously on Jan 10,
2013 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. M2, Affirmed A3 (sf); previously on Jul 18,
2011 Downgraded to A3 (sf)
Cl. M3, Upgraded to Ba3 (sf); previously on Jul 18,
2011 Downgraded to B3 (sf)
Cl. M4, Affirmed C (sf); previously on Jul 18,
2011 Downgraded to C (sf)
Cl. M5, Affirmed C (sf); previously on Jul 18,
2011 Downgraded to C (sf)
Cl. M6, Affirmed C (sf); previously on Aug 13,
2010 Downgraded to C (sf)
Cl. B1, Affirmed C (sf); previously on Mar 13,
2009 Downgraded to C (sf)
Cl. B2, Affirmed C (sf); previously on Oct 31,
2008 Downgraded to C (sf)
Cl. B3, Affirmed C (sf); previously on Oct 31,
2008 Downgraded to C (sf)
Issuer: Asset Backed Securities Corporation Home Equity Loan Trust
2004-HE10
Cl. M1, Downgraded to A3 (sf); previously on Jan 10,
2013 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. M2, Downgraded to Ba3 (sf); previously on Apr 12,
2012 Downgraded to Ba1 (sf)
Cl. M3, Downgraded to Ca (sf); previously on Mar 11,
2011 Downgraded to Caa2 (sf)
Cl. M4, Affirmed C (sf); previously on Apr 12,
2012 Downgraded to C (sf)
Cl. M5, Affirmed C (sf); previously on Jun 16,
2009 Downgraded to C (sf)
Cl. M6, Affirmed C (sf); previously on Jun 16,
2009 Downgraded to C (sf)
Issuer: Asset Backed Securities Corporation Home Equity Loan Trust
2005-HE2
Cl. M1, Downgraded to A3 (sf); previously on Jan 10,
2013 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. M2, Downgraded to Baa1 (sf); previously on Jan 10,
2013 A1 (sf) Placed Under Review for Possible Downgrade
Cl. M3, Affirmed Caa3 (sf); previously on Jul 12,
2010 Downgraded to Caa3 (sf)
Cl. M4, Affirmed C (sf); previously on Jul 12,
2010 Downgraded to C (sf)
Cl. M5, Affirmed C (sf); previously on Jul 12,
2010 Downgraded to C (sf)
Issuer: Equifirst Mortgage Loan Trust 2003-1
Cl. I-F1, Confirmed at Aaa (sf); previously on
Jan 10, 2013 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. M-1, Affirmed A3 (sf); previously on Apr
19, 2012 Downgraded to A3 (sf)
Cl. M-2, Affirmed Ba1 (sf); previously on Apr
19, 2012 Downgraded to Ba1 (sf)
Cl. M-3, Affirmed Ca (sf); previously on Mar
7, 2011 Confirmed at Ca (sf)
Issuer: People's Choice Home Loan Securities Trust 2005-1
Cl. M2, Downgraded to A3 (sf); previously on Jan 10,
2013 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. M3, Downgraded to A3 (sf); previously on Jan 10,
2013 A1 (sf) Placed Under Review for Possible Downgrade
Cl. M4, Affirmed Caa3 (sf); previously on Jul 21,
2010 Downgraded to Caa3 (sf)
Cl. M5, Affirmed C (sf); previously on Jul 21,
2010 Downgraded to C (sf)
Cl. B1, Affirmed C (sf); previously on Jul 21,
2010 Downgraded to C (sf)
Cl. B2, Affirmed C (sf); previously on Mar 13,
2009 Downgraded to C (sf)
Cl. B3, Affirmed C (sf); previously on Mar 13,
2009 Downgraded to C (sf)
Issuer: Saxon Asset Securities Trust 2005-3
Cl. A-1A, Downgraded to A3 (sf); previously on
Jan 10, 2013 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. A-2D, Downgraded to A3 (sf); previously on
Jan 10, 2013 Aaa (sf) Placed Under Review for Possible Downgrade
Cl. M-1, Downgraded to A3 (sf); previously on
Jul 16, 2010 Confirmed at Aa3 (sf)
Cl. M-2, Affirmed Ba2 (sf); previously on Jul
16, 2010 Downgraded to Ba2 (sf)
Cl. M-3, Affirmed Caa1 (sf); previously on Jul
16, 2010 Downgraded to Caa1 (sf)
Cl. M-4, Affirmed C (sf); previously on Jul 16,
2010 Downgraded to C (sf)
Cl. M-5, Affirmed C (sf); previously on Jul 16,
2010 Downgraded to C (sf)
Cl. M-6, Affirmed C (sf); previously on Jul 16,
2010 Downgraded to C (sf)
Cl. B-1, Affirmed C (sf); previously on Mar 13,
2009 Downgraded to C (sf)
Cl. B-2, Affirmed C (sf); previously on Mar 13,
2009 Downgraded to C (sf)
Cl. B-3, Affirmed C (sf); previously on Mar 13,
2009 Downgraded to C (sf)
RATINGS RATIONALE
The actions are a result of recent performance reviews of these transactions
and reflect Moody's updated loss expectations on these pools.
Today's rating actions constitute of a number of downgrades, upgrades,
and affirmations. The downgrades are primarily due to the tranches'
weak interest shortfall reimbursement mechanisms.
The tranches downgraded to A3 (sf) do not have interest shortfalls but
in the event of an interest shortfall, structural limitations in
the transactions will prevent recoupment of interest shortfalls even if
funds are available in subsequent periods. Missed interest payments
on these tranches can typically only be made up from excess interest after
the overcollateralization is built to a target amount. In these
transactions since overcollateralization is already below target due to
poor performance, any future missed interest payments to these tranches
are unlikely to be paid. Moody's caps the ratings of such tranches
with weak interest shortfall reimbursement at A3 (sf) as long as they
have not experienced any shortfall.
Ratings on tranches that currently have very small unrecoverable interest
shortfalls are capped at Baa3 (sf). For tranches with larger outstanding
interest shortfalls, Moody's applies "Moody's Approach to Rating
Structured Finance Securities in Default" published in November 2009.
These rating action take into account only credit-related interest
shortfall risks.
The methodologies used in these ratings were "Moody's Approach to Rating
US Residential Mortgage-Backed Securities" published in December
2008, "Pre-2005 US RMBS Surveillance Methodology" published
in January 2012, and "2005 -- 2008 US RMBS Surveillance
Methodology" published in July 2011. Please see the Credit Policy
page on www.moodys.com for a copy of these methodologies.
The above mentioned approach "Pre-2005 US RMBS Surveillance Methodology"
is adjusted slightly when estimating losses on pools left with a small
number of loans to account for the volatile nature of small pools.
Even if a few loans in a small pool become delinquent, there could
be a large increase in the overall pool delinquency level due to the concentration
risk. To project losses on pools with fewer than 100 loans,
Moody's first estimates a "baseline" average rate of new delinquencies
for the pool that is dependent on the vintage of loan origination (11%
for all vintages 2004 and prior). The baseline rates are higher
than the average rate of new delinquencies for larger pools for the respective
vintages.
Once the baseline rate is set, further adjustments are made based
on 1) the number of loans remaining in the pool and 2) the level of current
delinquencies in the pool. The volatility of pool performance increases
as the number of loans remaining in the pool decreases. Once the
loan count in a pool falls below 75, the rate of delinquency is
increased by 1% for every loan less than 75. For example,
for a pool with 74 loans from the 2004 vintage, the adjusted rate
of new delinquency would be 11.11%. In addition,
if current delinquency levels in a small pool is low, future delinquencies
are expected to reflect this trend. To account for that,
the rate calculated above is multiplied by a factor ranging from 0.85
to 2.25 for current delinquencies ranging from less than 10%
to greater than 50% respectively. Delinquencies for subsequent
years and ultimate expected losses are projected using the approach described
in the methodology publication listed above.
When assigning the final ratings to senior bonds, in addition to
the methodologies described above, we considered the volatility
of the projected losses and timeline of the expected defaults.
For bonds backed by small pools, we also considered the current
pipeline composition as well as any specific loss allocation rules that
could preserve or deplete the overcollateralization available for the
senior bonds at different pace.
Moody's also adjusts the methodologies noted above for Moody's current
view on loan modifications. As a result of an extension of the
Home Affordable Modification Program (HAMP) to 2013 and an increased use
of private modifications, Moody's is extending its previous view
that loan modifications will only occur through the end of 2012.
It is now assuming that the loan modifications will continue at current
levels into 2014.
Other factors used in these ratings are described in "Moody's Approach
to Rating Structured Finance Securities in Default" published in November
2009.
The above methodologies only applies to pools with at least 40 loans and
a pool factor of greater than 5%. Moody's may withdraw its
rating when the pool factor drops below 5% and the number of loans
in the pool declines to 40 loans or lower unless specific structural features
allow for a monitoring of the transaction (such as a credit enhancement
floor).
The primary sources of assumption uncertainty are our central macroeconomic
forecast and performance volatility as a result of servicer-related
activity such as modifications. The unemployment rate fell from
8.5% in December 2011 to 7.9% in January 2013.
Moody's forecasts a unemployment central range of 7.0% to
8.0% for the 2013 year. Moody's expects housing prices
to continue to rise in 2013. Performance of RMBS continues to remain
highly dependent on servicer activity such as modification-related
principal forgiveness and interest rate reductions. Any change
resulting from servicing transfers or other policy or regulatory change
can also impact the performance of these transactions.
A list of these actions including CUSIP identifiers may be found at:
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF320622
A list of updated estimated pool losses and sensitivity analysis is being
posted on an ongoing basis for the duration of this review period and
may be found at:
2005-2008
Excel: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689
Pre 2005
Excel: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF237255
REGULATORY DISCLOSURES
Moody's received and took into account one or more third party assessments
on the due diligence performed regarding the underlying assets or financial
instruments in these transactions and the assessments had a neutral impact
on the rating.
In conducting surveillance of these credits, Moody's considered
performance data contained in servicer and remittance reports.
Moody's obtains servicer reports on these transactions on a periodic basis,
at least annually.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Mark Branton
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Amita Shrivastava
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's takes action on $535 Million of Subprime RMBS Issued by Various Trusts